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Housing and Urban Development Community Development Block Grants

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The Housing and Urban Development (HUD) operates Community Development Block Grant (CDBG) programs that may provide grants for long-term needs to rehabilitate, construct or buy public facilities/infrastructures such as water and sewer systems. The grants have been used to develop new water sources, improve treatment, and replace distribution pipes. Also, for specific disasters, Congress may appropriate additional CDBG funding as Disaster Recovery grants.

In addition, HUD provides loans through the Section 108 Loan Guarantee Program which can be used to finance public facilities, economic and physical development projects, and housing rehabilitation. For more information, visit HUD's CDBG website.

Community Development Block Grant (CDBG) funds are generally used for long-term community needs involving housing, economic development, infrastructure and prevention of further damage to affected areas only if such use does not duplicate funding available from FEMA, the Small Business Administration, or the U. S. Army Corps of Engineers (USACE). Proceeds from CDBGs may be used to buy, construct, or rehabilitate public facilities such as water and sewer systems. CDBGs may be used to match FEMA grants. Grantees may fund activities that meet community development needs of particular urgency because existing conditions pose a serious and immediate threat to the health or welfare of the community and other financial resources are not available to meet such needs. CDBG funds may be used for activities which include, but are not limited to:

  • Acquisition of real property
  • Acquisition of property for public purposes
  • Construction or reconstruction of water and sewer facilities, streets, and other public works
  • Relocation and demolition
  • Rehabilitation of public and private buildings
  • Public services, within certain limits
  • Planning activities
  • Activities relating to energy conservation and renewable energy resources
  • Assistance to nonprofit entities for community development activities
  • Assistance for profit-motivated businesses to carry out economic development and job creation/retention activities

In addition to submitting a Consolidated Plan to HUD, the grantee must also encourage citizen participation in the proposed project and spend at least 70 percent of its CDBG grant funds for activities that benefit low- and moderate-income persons over a grantee-specified one-, two-, or three-year time period. HUD provides two types of CDBG grants:

CDBG - Entitlement Communities (PDF) (1 pg, 27K, About PDF). Entitlement Communities are metropolitan cities with populations of at least 50,000; principal cities of Metropolitan Statistical Areas (MSAs); or qualified urban counties with populations of at least 200,000 (excluding the population of entitled cities). They are able to receive grants directly from HUD.

CDBG - State Administered (PDF) (1 pg, 68K). Since States are in the best position to know, and to respond to, the needs of local governments, Congress amended the Housing and Community Development Act of 1974 (HCD Act) in 1981 to give each State the opportunity to administer CDBG funds for non-entitlement areas. Non-entitlement areas include those units of general local government which do not receive CDBG funds directly from HUD as part of the entitlement program (Entitlement Cities and Urban Counties). Non-entitlement areas are cities with populations of less than 50,000 (except cities that are designated as principal cities of Metropolitan Statistical Areas), and counties with populations of less than 200,000. The State CDBG program has replaced the Small Cities program in States that have elected to participate. Currently, 49 States and Puerto Rico participate in the program. Non-Entitlement Communities must apply for CDBG funding through their state (excluding Hawaii). Non-Entitlement Communities in Hawaii apply directly to HUD.

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In response to specific disasters, Congress may appropriate additional funding under CDBG Disaster Recovery grants to rebuild in Presidentially-Declared Disaster areas and provide crucial seed money to start the recovery process. Disaster Recovery grants often supplement, but may not duplicate, grants from the Federal Emergency Management Agency (FEMA), the Small Business Administration (SBA), or the U.S. Army Corps of Engineers (USACE).

CDBG Disaster Recovery grants are noncompetitive and grantees must submit an Action Plan describing the needs, strategies for long-term recovery and projected uses of assistance before receiving funds. Through waivers to the regular CDBG laws and regulations, CDBG Disaster Recovery funds provide grantees greater flexibility in administering funds to help cities, counties, and States recover from disasters, especially in low-income areas. For example, Disaster Recovery grantees are required to spend at least 50 percent of their funds on activities that principally benefit low-and moderate-income persons, as opposed to the regular program's 70 percent requirement. However, all activities must be located in Presidentially-Declared Disaster areas and must relate to an impact caused by the disaster. Among eligible activities used for recovery efforts under CDBG Disaster Recovery funds are several relating to infrastructure.

Examples of these activities include:

  • Debris removal not covered by FEMA
  • Acquisition, construction, or rehabilitation of public facilites such as neighborhood centers
  • Construction/ reconstruction of streets, water/sewer or drainage systems
  • Construction/reconstruction of water lift stations
  • Public services
  • Helping businesses retain or create jobs in disaster impacted areas
  • Planning and administration costs (limited to no more than 20 percent of the grant)

More information can be found at HUD's CDBG Disaster Recovery Assistance website.

Section 108 loan guarantees provide communities with a source of financing for public facilities, economic development, housing rehabilitation, and large-scale physical development projects. It allows local governments to transform a small portion of their CDBG funds into federally guaranteed loans large enough to pursue physical and economic revitalization projects. Section 108 loans are not risk-free, however; local governments borrowing funds guaranteed by Section 108 must pledge their current and future CDBG allocations to cover the loan amount as security for the loan. Activities eligible for Section 108 financing include, but are not limited to:

  • Economic development activities eligible under CDBG
  • Acquisition of real property
  • Rehabilitation of publicly owned real property
  • Construction, reconstruction, or installation of public facilities (including street, sidewalk, and other site improvements)
  • Related relocation, clearance, and site improvements
  • Payment of interest on the guaranteed loan and issuance costs of public offerings
  • Debt service reserves
  • Public works and site improvements in colonias (colonias are rural communities located within 150 miles of the US-Mexican Border)

Eligible applicants include:

  • Metropolitan cities and urban counties (i.e., CDBG entitlement recipients)
  • Non-entitlement communities that are assisted in the submission of applications by States that administer the CDBG program and
  • Non-entitlement communities eligible to receive CDBG funds under the HUD-Administered Small Cities CDBG program (Hawaii). The public entity may be the borrower or it may designate a public agency as the borrower

Commitments are limited as follows:

  1. Entitlement public entities—An entitlement public entity may apply for up to five times the public entity's latest approved CDBG entitlement amount
  2. State-assisted public entities—A non-entitlement public entity may apply for up to five times the latest approved CDBG amount received by its State
  3. Non-entitlement public entities eligible under the HUD-administered Small Cities Program—For a public entity in Hawaii, the maximum commitment amount is five times the public entity's latest grant under 24 CFR 570, Subpart F, minus any outstanding Section 108 commitments and/or principal balances on Section 108 loans

For more information, see HUD's CDBG Section 108 website or the HUD Section 108 profile (PDF) (2 pp, 36K, About PDF).

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